2013 a Strong Year for U.S. Private Foundations, Reports New Study from Foundation Source

FAIRFIELD, CT—May 21, 2014—Foundation Source, the nation’s largest provider of comprehensive services for private foundations, today released the 2014 edition of its Annual Report on Private Foundations. According to the report, 2013 was a strong year for those private foundations with less than $50 million in assets, a segment that constitutes 98% of all U.S. foundations. The combination of a recovering stock market and additional contributions by their funders resulted in increased foundation endowments for a second straight year, in spite of charitable distributions that exceeded the 5% minimum by almost 50%. The complete report can be downloaded at www.foundationsource.com/resources/2014-annual-report.

According to Andrew Schulz, an executive vice president at Foundation Source and the author of this year’s report, “Having observed the consistently high rate of giving among these foundations over the past five years, we are no longer surprised by their generosity. Indeed, these foundations have demonstrated time and time again that compliance with the 5% minimum distribution requirement is not what drives their philanthropy.”

Now in its third year, the report from Foundation Source is significant in that all other foundation research focuses on the “mega foundations,” those that make up just the top 2% of all foundations, yet hold roughly 70% of foundation assets. Extrapolating data from these largest foundations to the entire community can lead to significant misunderstandings about the sector as a whole.

Top findings from the 2014 report include:

Average foundation endowments grew by 14.1% In aggregate, assets held by the foundations sampled in the report grew from $2.36 billion at the end of 2012 to $2.69 billion by the end of 2013 (a 14.1% increase). This was the second straight year of asset growth by the foundations in the study, reflecting a continuing and sustained recovery of the economy in general. Endowment growth was the product of both investment returns and new contributions to the foundations by their funders.

Charitable distributions averaged 7.3% of assets, well in excess of the IRS-mandated 5% payout requirement In 2013, the foundations in the report distributed 7.3% relative to their average asset balances, an amount well in excess of that which is required by law. More than a third of the foundations (35%) distributed 10% or more. Since the recession began in 2008, foundation distributions have consistently exceeded the 5% minimum every year. Despite the still sizeable disbursements, aggregate giving in real dollars was slightly down in 2013 from 2012 (2.5%), suggesting that some of the foundations in this year’s report used 2013 as a “rebuilding” year.

General support grants accounted for nearly half of giving by foundations with less than $10 million Foundations with assets under $10 million awarded nearly as much in general support grants as they awarded in grants for specific projects, contradicting the view that foundations rarely provide general operating support. Interestingly, the larger foundations in the report ($10M – $50M), gave much more in specific purpose grants than general support grants by a ratio of 3:1, suggesting a preference for project funding as foundations increase in asset size.

Foundation Source’s report is based on the transactions of 714 Foundation Source clients, collected between January 1 and December 31, 2013. The data represent actual foundation transactions recorded by Foundation Source (not opinion surveys or estimates) as it processed grants and paid expenses on behalf of its U.S. clients and recorded investment information. Because most studies rely on data from foundation tax returns, and the returns aren’t publicly available for at least a year, the reported results are often outdated before they’re even published.

In 2012 and 2013, the Annual Report on Private Foundations included a section about how foundations allocated their assets among various investment classes (e.g., cash, equity, fixed income). This year, in response to strong interest from donors and financial advisors on this topic, Foundation Source plans to release a separate report looking at aggregated asset investment data in 2013. That report is expected to be published this fall.

Foundation Source is the nation’s largest provider of comprehensive support services for private foundations, bringing specialized knowledge and expertise to clients across the country. The company’s administrative services, online foundation management tools, and philanthropic advisory services provide a complete outsourced solution for private foundations. The result: better-run, more effective foundations, and more enjoyable philanthropy. Our clients supply the funds, the vision, and the philanthropic goals; we provide everything else.

Today, Foundation Source provides its services to more than 1,100 family, corporate, and professionally staffed foundations, of all sizes, nationwide. We work in partnership with wealth management firms, law firms, and accounting firms, as well as directly with individuals and families. Foundation Source is headquartered in Fairfield, Connecticut, with offices in Boston, Denver, Los Angeles, New York City, Philadelphia, San Francisco, South Florida, Washington, D.C., and Winston-Salem.

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Foundation Source is the nation’s largest provider of comprehensive support services for private foundations, serving more than 1,300 family, corporate, and professionally staffed foundations, of all sizes, nationwide.